Finance and Capital Markets

Another subject that Khan Academy has a lot of videos on is Finance and Capital Markets. None of this is particularly new to me but I thought I’d listen to them while mostly doing something else as a refresher. Looking over this list of topics, I was particularly intrigued in that he covers the more exotic parts of the financial work such as various types of derivatives and collateralized debt obligations which you don’t usually see in beginner level finance courses. There are also videos on more contemporary topics such as the housing crisis and the ongoing issue of Brexit.

The course starts with the very basics, including compound interest and going on to the notion of the present value. More interestingly, it also covers stuff like how banks and credit cards work, how marginal taxes are calculated, inflation, mortgages etc. Most of this material is naturally geared towards Americans and therefore less useful to the rest of us but I’ve long felt that every country needs to teach basics like this as part of the national curriculum to prepare students for the working world. I’d even venture a step further and say that it should cover the commonly available investment avenues in each country as well. This specific advice is even less useful to non-Americans. We don’t care what the difference is between traditional IRAs and Roth IRAs but it should be required knowledge for Americans. Also great are the more general topics like why companies need accounts, different accounting methods and the basics of valuing companies.

Going deeper into the course, I’m more doubtful about the value of the other videos. Sal Khan goes into the more exotic areas of finance in astonishing detail which is good reminder that he worked at a hedge fund before starting up Khan Academy. I certainly learned a lot, such as what exactly is the difference between an angel investor and a seed investor, what an interest rate swap is and the reasoning behind the Black-Scholes formula. I don’t think it’s actually useful for most people however given that the ones who would actually want to trade futures contracts and so on would probably need much education than what this course can offer.

Apart from that the course includes very extensive coverage of the financial crisis of 2007-2008 and what amounts to a very harsh critique of the government’s response. Khan delves into the probable reasons for the rise in house prices spurred on by the growing use of CDOs, how it made everyone plenty of money while times were good but was a recipe for disaster the moment that house prices started to wobble and most of all on how the government’s plans amount to a massive bailout. His anger and disgust about the bailout comes across very clearly and while his enthusiasm for the subject is commendable and he certainly is very knowledgeable, I feel like most of the videos feel too much like an extended rant to belong in a properly organized course. I did find his ideas how alternative solutions to be especially valuable but a lot of the rest of it seem like they were filmed in the heat of the moment while the crisis was unfolding and should have been redone to more professional standards long ago.

This lack of quality control or even consistency weighs down the whole course. Pretty much the only content that exists are the videos, no quizzes, none of the sophisticated exercises the site’s math courses are famous for, not even the text summaries that you can find in their World History course. I find the lack of exercises particularly critical as there is no way students will learn concepts like present value or how accounting works without doing it themselves. While there is a lot of information contained in the video lectures, the average quality of each video is rather poor. Khan’s unscripted lectures are rambling and repetitive, which is why there are so many of them and they are so long. It’s hard to concentrate on them given how unfocused they are. They feel more like podcasts that you can listen to while driving or something rather than lectures to which you devote your undivided attention.

On balance while I wouldn’t say there isn’t value in this series of videos, I find it very difficult to recommend it to anyone. It’s too disorganized and rambling to be considered a course and the lack of any supplementary material makes it doubtful that students will retain much after watching them. Students would be better served following the Finance courses on Coursera and the like even if they don’t cover contemporary events.

As I’ve said, I can’t really recommend this particular course because of how US-specific it is and how rambly it is in general. Unfortunately I also can’t think of a better alternative. The usual Finance courses are too geared towards finance professionals and the economics courses don’t cover the day to day finance of normal life.

One thing I definitely did learn from this particular course is how the US government’s bailout was basically a huge cash giveaway to the finance industry. I mean, I did know that beforehand, but I really gained a new appreciation of how blatant it was and how, unlike what the government said at the time, there always were more reasonable alternatives.